They have had enough time: Frank Hancock, MD, Barclays Capital

With the Securities and Exchange Board of India's (Sebi) June 2013 deadline for promoters to reduce holdings in their companies to 75% looming ever closer, as many as 300 companies on which data is available with the regulator — public sector undertakings as well as private sector companies — have yet to take steps to comply with the mandated ownership levels.

While some companies may be hoping for a last-minute delay in the deadline, there is every reason to believe that Sebi chairman U K Sinha is serious about implementing it, and will not relax his directive.

Towards this end, there have already been rumblings in the press about penalties for noncompliance and rumours of companies being called in and reminded of the deadline by Sebi.

However, Sebi is right to keep to the June deadline, and its overall strategy makes sense for three main reasons. One, the 75% public holding rule will be good for the capital market, implying an equity infusion of $6-8 billion, based on the 300 companies for which information is available.

Increasing the free float of listed companies will boost liquidity, encourage retail and institutional demand, and indirectly boost valuations. This rationale makes a lot of sense for India and is in line with international practice.

Two, Sebi's actions have been well flagged, and a number of routes — offer for sale, institutional placement, and so on — have been spelt out by which companies can comply.

With the first round of consultations having taken place almost a decade ago and a detailed three-year timetable being issued in July 2010, companies have had several years to comply and should have been able to plan for the deadline.

Three, given the second point, any objections that market conditions are not right to offload shares are somewhat specious. There has been plenty of time for compliance.

The Sensex is now trading around 19,000, and coupled with the fact that the government is pushing its reform agenda again, a positive environment beckons us for the first half of 2013.

Enforcing this step is in line with Sebi's effort to improve the functioning of the capital market. It should push ahead with this sensible rule.